A short thought on tactics

Even without the Fed's help, this is a market designed to help one lose money. Higher volatility means that random noise can generate an asset price move that one would, under more normal circumstances , associate with "signal." This in turn causes many in the market to establish/close positions on the misguided notion that there is useful informational content in price moves.

Until year end, Macro Man does not expect to be able to explain much of what he sees without using the words "noise" or "positioning". In this sort of market, selling what others have just bought and buying what they have just sold is probably a useful strategy.

In that vein, Macro Man was interested to see that two of the more high profile foreign exchange technical analysts on the street were both stopped out of short USD/JPY positions at 112.20, courtesy of the TAF announcement. As such, and given the nasty fade in equities, it would appear prudent to take profits on his partial delta hedge of USD/JPY straddles. Macro Man therefore sells $15 mio USD/JPY at 112.06 spot basis.

In the yen? Probably not that much....certainly when stops were run, something will have gone through, but it's not like brokers were reporting heavy uying (or, for that, matter, selling) of yen crosses. Just a classic low-volume screw job.

Equity volume's abit easier to track, of course...looking like a reasonable volume day, at least relative the the prior rally. Late rally notwithstanding, today's price action didn't exactly engender a lot of confidence in a unidirectonal melt-up...

Get used to it. The true price of the SPX right now is 1500 +/-3%. It goes for the rest of them over there, too. All relative advantage of one index over another has completely disappeared in the last two weeks, spread ratios calculated on the basis of expected relative volatility returning a flat nothing - zero. Meanwhile, the CBOT raised margins a cool 30%.

- “…two of the more high profile foreign exchange technical analysts on the street…”: who’s that guys? I personally like Nicole Elliott’s Ichimoku snapshots, perhaps because of their coloured clouds and lines which resemble my daughters’ sketches when they were two years old;

- “When in Rome do as the Romans do…”: don’t you think that, when it comes to tracking a country’s macroeconomic backdrop and monetary policy, major local banks’ research pieces might be much more useful than global investment ones, which are full of “should… could… might… on one hand, but on the other hand”? Most of the major countries and economies seem to be well covered on the net by local commercial banks, but two exceptions: Japan and Switzerland. Japanese political scene is not that different from the Italian one (provided you read my fellow-citizen Machiavelli’s masterpiece Il Principe, and I bet you did…), while Swiss banks produce a huge quantity of research on other countries and currencies, but not that much on their own. Did you ever happen to run into any good research piece on such countries?

- “Who’s behind Inspector Lestrade of Scotland Yard? Mr. Nouriel Roubini, I guess...”: ancient Romans prove to be right once again, with their nomina sunt consequentia rerum (or was it substantia rerum... - Roubini reads like the Italian rubini, which means rubies: the most precious of stones and symbols of inordinate pride. His calls are controversial, at least, but when I read your November 26th’s piece I had a feeling as you somehow shared his “US hard landing or even recession” thesis as well, even with hugely different timings (which obviously makes a huge different when it comes to trading…). Do Holmes and Lestrade share the same macroeconomic views?